Santa finally made it to Wall Street. <\/p>\n
But instead of getting shiny new bicycles and virtual reality goggles as presents, traders got socks and underwear.<\/p>\n
In other words… Yes, we got a rally. But it wasn’t very exciting.<\/p>\n
It took a full seven days to play out. But the seasonal bullish period that includes the last five trading days of the old year – and the first two trading days of the new year – did manage to give a small gift to the bulls.<\/p>\n
Thanks to Wednesday’s bounce, the S&P 500 finished the Santa Claus rally with a gain of 32 points – roughly 0.8%. That’s below the average 1.2% gain the bulls usually get during this time frame.<\/p>\n
But a gain is a gain. And as the bulls who pay attention to such statistics will cheerfully point out… even a modest Santa Claus rally increases the chances of a positive return for stocks in 2023.<\/p>\n
That’s not a guarantee, of course.<\/p>\n
We can scroll through history and find plenty of examples when a Santa Claus rally did not lead to a positive return for the year (2001 being a notable example). <\/p>\n
But we’re talking about probability here. And the statistics show that whenever Santa shows up, stocks tend to be bullish.<\/p>\n
But there’s one nagging problem…<\/p>\n
The long-term monthly chart of the S&P 500 still looks vulnerable to a waterfall decline. Take a look…<\/p>\n
![\"Chart\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202301\/20230106-jmu-01_wqx365.png\")
<\/div>\nThe index has been trading below its 20-month exponential moving average (EMA – blue line) for several months.<\/p>\n
By itself, that’s bearish. The S&P 500 needs to close above its 20-month EMA at the end of the month to create a bullish pattern on the chart.<\/p>\n
![\"signature\"](\"https:\/\/files.jeffclarktrader.com\/global\/signatures\/jeff-clark-signature.png\")
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